The first large-scale experiment in how to keep struggling borrowers in their homes is being run by the FDIC at seized mortgage lender IndyMac, the Wall Street Journal reports, and the results are mixed. Of some 65,000 borrowers with “seriously delinquent” mortgages, about 47,000 qualify for aid through loan modifications, and the average renegotiation has cut homeowners’ payments by some $380, or 23%.
The FDIC program resets borrowers’ payments at no more than 38% of their incomes by cutting interest rates, extending loan terms, and using smaller balances to set payments. Only 3,500 borrowers have completed the process, while several thousand more are in the works. And there are big hurdles: many homeowners haven't responded, financial information is often hard to find, and the FDIC can’t aid troubled borrowers who haven’t yet missed a payment. "I'm going to stop paying so they'll modify the loan," one borrower tells the Journal. "Otherwise they won't help me."